Category: Featured

  • Singapore Cracks Down on Travelers With Vapes

    Singapore Cracks Down on Travelers With Vapes

    Image: monticellllo

    Singapore authorities will step up checks at air, land and sea checkpoints to prevent e-cigarettes from entering the city state, reports the South China Morning Post.

    “Incoming passengers may be screened for e-vaporizers and their components at the arrival halls, and those found with e-vaporizers or their components will be fined,” said the Ministry of Health and the Health Sciences Authority in a media release.

    Vaping is illegal in Singapore, and offenders can be fined up to SGD2,000 ($1,490). Those who import, distribute or sell such products face stiffer penalties, including a possible jail term.

    Despite the ban, the number of people caught using and possessing vapes has been rising, including among underage consumers.

    Apart from the border checkpoints, checks will be stepped up at places such as the central business district, shopping centers, parks and smoking areas as well as public entertainment outlets such as bars and clubs.

    Since Dec. 1, enforcement officers from the National Environment Agency have been empowered to take action against people who use or own vapes.

    Singapore authorities said that their multi-agency approach is aimed at protecting its population.

    The World Health Organization said last week that urgent action is needed to control e-cigarettes to protect children and nonsmokers.

  • Warnings for Vapes Resembling Alcohol

    Warnings for Vapes Resembling Alcohol

    Image: FDA

    On Dec. 20, 2023, the U.S. Food and Drug Administration issued warning letters to three online retailers for selling and/or distributing unauthorized e-cigarettes that imitate packaging for bottles of alcohol. These retailers sold Luckee Vape Daniels brands, which are flavored disposable e-cigarette products that come in a variety of common alcoholic drink flavors that may be appealing to young people, including icy pina colada, frozen strawberry daiquiri, frozen mangorita and watermelon martini.

    Data from the 2023 National Youth Tobacco Survey indicate that disposable products are the most commonly used type of e-cigarettes among U.S. middle and high school students. Among current youth e-cigarette users, approximately nine in 10 reported using flavors, with fruit flavors being the most popular (63.4 percent) and about one in 14 (7.2 percent) reporting use of products with alcoholic drink flavors.

    “FDA is committed to taking action across the supply chain, including among retailers, to remove unauthorized tobacco products from the marketplace,” said Brian King, director of the FDA’s Center for Tobacco Products, in a statement. “This includes continued monitoring of the online marketplace to identify and combat against emerging products of concern.”

  • Lawyers Seize on BAT’s Impairment Notice

    Lawyers Seize on BAT’s Impairment Notice

    Image: Bits and Splits

    British American Tobacco’s recent decision to write down the value of some of its U.S. brands has spawned a frenzy among law firms eager to represent investors who feel shortchanged by the multinational’s move.

    On Dec. 6, BAT disclosed that it would take an impairment charge of approximately $31.5 billion after reassessing the value of certain cigarette brands, including Newport, Pall Mall, Camel and Natural American Spirit.

    The write-down reflects the diminished outlook for combustible tobacco products, according to BAT. CEO Tadeu Marroco described it as “accounting catching up with reality.”

    Following the announcement, BAT’s stock price fell by  8.5 percent, to close at $28.86 per share on Dec. 6, 2023, causing investors to lose money.

    At least three law firms, including Frank R. Cruz, Howard G. Smith and Pomerantz, have started investigating BAT on behalf of investors for possible violations of securities laws.

    Each of them is encouraging investors to join their legal cases.

    While acknowledging the short-term pain, others have praised BAT’s impairment as a realistic move, noting that it would be irresponsible to ignore the reality of a shrinking market for traditional tobacco products.

    In a recent op-ed for Tobacco Reporter, Brand Finance Group Managing Director Richard Haigh described the write-down as “a positive step in BAT’s journey toward a resilient future.”

  • Strategic Impairment

    Strategic Impairment

    Images: BAT

    BAT’s write-down of its U.S. cigarette brands is a positive step in its journey toward a resilient future.

    By Richard Haigh

    Earlier this month, BAT announced a $31.5 billion impairment on the value of some of its U.S. cigarette brands. The affected brands, including Newport, Camel, Pall Mall and Natural American Spirit, will see their value on BAT’s balance sheet adjusted to a finite lifetime of 30 years, resulting in a noncash impairment charge. This signifies the first instance where a major global tobacco company has written off some of the value of its traditional cigarettes business in a significant market such as the United States.

    BAT’s write-down highlights the challenges faced by traditional tobacco businesses in the wake of evolving industry dynamics. BAT attributes the move to economic challenges in the U.S., where inflation-weary consumers are shifting to cheaper brands, as well as the rise of illicit disposable vapes. Furthermore, intensifying regulatory environments and the heightened awareness of health risks have resulted in a decline in cigarette sales volumes in certain markets. These are predicted to continue to fall, with BAT adding that global tobacco industry sales volumes will be down around 3 percent in 2023.

    Responding to Change

    The decision to write down the value of some of its brands was a bold step for BAT because, despite the short-term pain, the reality is that the market for cigarettes is shrinking, and pretending otherwise would be irresponsible on the part of management.

    In the past, failure to embrace change has decided the fate of several top brands. Blockbuster, a giant in the video rental industry with thousands of stores worldwide, failed to recognize the shift toward online streaming and mail-order DVD services. In 2010, Blockbuster filed for bankruptcy, unable to compete with the likes of Netflix. Kodak, which resisted the shift to digital cameras, suffered the consequences, filing for bankruptcy in 2012. Nokia, once a dominant force in the mobile phone industry, struggled to adapt to the rise of smartphones and the popularity of app ecosystems. Nokia’s market share declined rapidly, and eventually, it sold its mobile phone business to Microsoft in 2014. These all serve as cautionary examples.

    BAT’s move is crucial in the context of the company consciously steering away from potential pitfalls, showcasing a commitment to survival and growth in new categories. The company is already investing heavily in alternative products, focusing on vaping and oral nicotine and wants 50 percent of its revenues to come from these by 2035.

    Appointed CEO in May 2023, Tadeu Marroco has played a crucial role in guiding the company through a transformative phase, emphasizing growth in emerging categories such as vapes and e-cigarettes.

    Correlation Between Leadership Tenure and Impairments

    Tadeu Marroco assumed the role of CEO in May 2023. Having previously served as BAT’s finance director, Marroco has played a crucial role in guiding the company through a transformative phase, emphasizing growth in emerging categories such as vapes and e-cigarettes.

    The correlation between tenure length and significant impairments is an interesting one to note. When assessing 2019’s largest impairments, a common thread emerges: new leadership, as depicted in the charts accompanying this text. In this context, BAT’s decision is not an isolated incident but rather a strategic response to industry challenges, reflecting a broader pattern observed in companies experiencing changes in leadership.

    When looking at 2019’s biggest goodwill impairments, except for Procter and Gamble and CenturyLink, all companies listed had either a new CEO, a new chief financial officer (CFO) or both. Most of these companies’ previous leaders decided not to take an impairment in 2018. CenturyLink did take an impairment in 2018, when it also had both a new CEO and CFO. Therefore, new leadership appears to have a significant impact on the likelihood a company will impair its goodwill. Among the entire sample, we found that 30 percent of all impairments occur within the first year of having a new CEO or CFO.

    For larger impairments, where the impairment represents at least half of the goodwill carrying amount, 41 percent of these occur within the first year of new leadership. At best, this analysis suggests that goodwill impairment can be influenced by varying personal opinions of management personnel and their perceptions of outlook and risk. At the worst, this analysis suggests that there may be an ulterior motive within the decision to impair goodwill. By taking an impairment at the beginning of your tenure as a CEO or CFO, it helps you to either set a precedent that suggests your predecessor was negligent/overoptimistic about their acquisitions or influence the share price to fall initially then rise throughout the rest of your tenure.

    Given these insights, the timing of the impairment—just nine months into Marroco’s tenure as CEO—aligns with broader trends observed in companies with leadership changes. Adding to the leadership transition, BAT has recently appointed a new CFO, scheduled to assume the role in April 2024.

    Looking Ahead

    BAT’s impairment announcement should be viewed as a positive and necessary step in the company’s journey toward a resilient future. Rather than focusing solely on the financial implications, stakeholders should recognize the strategic foresight behind this decision.

    However, the industry is consistently grappling with challenges. Plain packaging laws have notably evolved, gaining increased comprehensiveness in some countries. These regulations now extend their coverage from traditional tobacco products to encompass heated tobacco, tobacco accessories and other nicotine-containing items. Adding to the recent developments, this month, the World Health Organization has shifted its focus to vaping, urging governments to apply tobacco-style control measures to address this emerging concern.

    Therefore, BAT and other tobacco companies must proactively adapt their strategies, leveraging innovation and regulatory compliance, to navigate the evolving landscape and ensure long-term success in an industry marked by ever increasing health-related safeguards and regulatory barriers.

    Richard Haigh is group managing director at Brand Finance.
  • Thailand Urged to Strengthen Enforcement

    Thailand Urged to Strengthen Enforcement

    Photo: kikujungboy

    Thailand should strengthen its monitoring and enforcement of e-cigarettes, according to World Health Organization representative Jos Vandelaer, reports The Nation.

    Speaking at the Thai Health Promotion Foundation on Dec. 18, Vanderlaer praised the kingdom’s decision to prohibit vaping in the country.

    However, because vaping is still widespread in Thailand, he believes the government must do a better job of enforcing the law.

    Vandelaer rejected the notion that e-cigarettes are an effective smoking cessation tool, as claimed by tobacco harm reduction activists. “Don’t get fooled,” he was quoted as saying. “There is as of now no evidence that the commercialization of e-cigarettes as consumer products has had a net benefit for public health.”

    According to a recent study by the Faculty of Medicine Ramathibodi Hospital, 8.8 percent of Thais aged 13 to 15 used e-cigarettes in 2021, up from 3.3 percent in 2015.

    Vanderlaer’s comments come in the wake of a WHO statement urging action to prevent the uptake of e-cigarettes to counter nicotine addiction. On the same day, the global health body released a technical note with detailed information on the evidence and factors underpinning its guidance.

  • Ireland Halts Vape Tax

    Ireland Halts Vape Tax

    Photo: Orlando Bellini

    Ireland’s finance minister, Michael McGrath, postponed a vaping tax over concerns that it would discourage smokers from quitting with e-cigarettes.

    Officials from the Department of Finance cited the need to strike a balance between discouraging young people from vaping and supporting existing smokers who switch to e-cigarettes to quit. Health officials recommended e-cigarettes be taxed differently based on their comparative harm versus traditional cigarettes, according to media reports.

    McGrath has said a new tax on vapes will be “challenging” to implement. “A domestic tax will require significant IT, administrative, control and compliance costs,” he said.

    Tobacco harm reduction activists applauded the decision. “We welcome the decision of the minister of finance and ask the Irish government to keep a tax differential between electronic and traditional cigarettes in the future large enough to incentivize smokers to switch,” said Michael Landl, director of the World Vapers’ Alliance, in a statement.

    “The risk profile of vaping products is much lower than that of combustion cigarettes, and they should be taxed as such. If the tax had been approved, it would have pushed tens of thousands of vapers back to smoking.”

    The government has not specified a new date for the vape tax. Some suspect it may await the updated EU Tobacco Tax Directive, which is expected to include an EU-wide excise tax on vaping products.

  • Vapes Evading U.S. Import Duties

    Vapes Evading U.S. Import Duties

    Image: Gudellaphoto

    E-cigarette companies have imported hundreds of millions of dollars of disposable products from China into the United States without paying taxes and import duties, according to an AP report.

    Last week, U.S. authorities confiscated 1.4 million units of unauthorized single-use e-cigarette products at Los Angeles international airport, with an estimated retail value of more than $18 million. The products were mislabeled as toys, shoes and other items.

    Records show that the makers of disposable vapes routinely mislabel their shipments as battery chargers, flashlights and other items. Critics blame ineffective regulation. “The steps toward regulating disposables have been very weak, and that has enabled this problem to get bigger and bigger,” said Eric Lindblom, a former Food and Drug Administration official.

    Heaven’s Gifts, the parent company of Shenzhen iMiracle, which manufactures the popular Elf Bar and EB brands, previously described how it could help customers evade import fees and taxes, according to the AP report.

    The firm’s website reportedly advertised “discreet” shipping methods, such as mislabeling the content of e-cigarette shipments and declaring a low product value. 

    Another strategy appears to be shipping e-cigarettes by air rather than sea. Air carriers are not required to disclose the same level of detail about their cargo as ocean vessels.

    U.S. tobacco companies have complained that their vaping products cannot compete with such lower priced disposables. Altria Group and Reynolds recently filed cases in California and with the International Trade Commission, respectively, against importers of disposable vapes.

    Flavored disposables began pouring into the U.S. shortly before China banned vaping flavors last year. China’s vaping manufacturing sector, which produces the lion’s share of e-cigarettes worldwide, is worth an estimated $28 billion, and the U.S. accounts for nearly 60 percent of the country’s vape exports, according to the China Electronics Chamber of Commerce.

    Authorities have encouraged those exports while at the same time curtailing the country’s domestic vaping business.

  • Juul Files PMTA for Age-Restricted Products

    Juul Files PMTA for Age-Restricted Products

    Image: Timon Schneider/Wirestock

    Juul Labs has submitted a premarket tobacco product application (PMTA) to the U.S. Food and Drug Administration for its next-generation platform (NGP) device and menthol-flavored pods requiring user age verification.

    According to a company announcement, the submission includes comprehensive science and evidence for new menthol-flavored pods at 18 mg per milliliter nicotine concentration to be used with Juul Labs’ next-generation device, for which the company submitted a PMTA to the FDA in July 2023 along with tobacco-flavored pods.

    “Our next-generation ENDS [electronic nicotine-delivery system] platform, launched initially in the U.K. in 2021 as ‘Juul2,’ delivers an improved vapor experience for adult smokers, utilizes unique Pod ID authentication to address illicit products and incorporates age verification technology capabilities,” Juul wrote on its website. “This latest submission advances our commitment to addressing two public health problems: improving adult smoker switching from combustible cigarettes and restricting underage access to vapor products.”

    Each NGP-compatible menthol pod contains a secure microchip that communicates to the NGP device a requirement for age verification prior to use. The NGP device itself can further be locked by the user at any time to prevent unauthorized use. In addition to limiting the number of devices that can be purchased, Juul Labs will also limit the number of new devices that each unique age-verified user can activate and use with menthol-flavored pods to further mitigate the risks of social sourcing.

    “The technological advancements that enable device-level age verification complement the programmatic efforts Juul Labs has taken since the company’s 2019 reset to address underage use of its products,” Juul wrote.

    The next-generation platform can be used with a mobile or web-based app that enables age verification technology, including device-locking and real-time product information and insights for age-verified consumers.

    As the apps are already available in other markets, Juul Labs said it adheres to industry-leading data-privacy protections that are compliant with the EU’s General Data Protection Regulation. For example, the NGP-compatible Juul mobile app and web app do not transmit any customer location data to Juul Labs; the location data necessary to provide app features is stored locally on the customer’s smartphone or computer.

    Similarly, the company does not have access to a consumer’s device usage (i.e., puff) information.

    Device usage information necessary to provide app features is stored either locally on the customer’s smartphone or computer, or in customer opt-in, end-to-end encrypted backups.

    In June 2022, the FDA denied marketing authorization for the currently marketed Juul system. Juul Labs challenged the order in court, and its products remain on the U.S. market pending an administrative review.

  • NASCAR Museum Shut Following Lawsuits

    NASCAR Museum Shut Following Lawsuits

    Image: fabioderby

    An independently owned NASCAR museum in Winston-Salem, North Carolina, USA, has closed following lawsuits from ITG Brands after it bought the Winston name in 2015, according to The Drive.

    In 2019, ITG launched a series of lawsuits against Will and Christy Spencer, who owned the Winston Cup Museum. ITG’s lawsuits, according to a court filing from the Spencers, stated that the company felt the “purchase of Winston Cigarettes from R.J. Reynolds Tobacco Co. in 2015 somehow gave it ownership of Winston Cup history” and that ITG felt the museum was “infringing on their ability to market their cigarettes to racing fans.” Because ITG owns the Winston brand, the company argued that it owned the Winston-branded artifacts the museum possessed.

    The claims were dismissed twice.

    In July, the museum temporarily closed with a plan to rebrand as the Ralph Seagraves Memorial Museum upon reopening. However, the couple decided it was not financially viable.

    “After the past couple of years, we just can’t afford to keep it open and we’ve got to reinvent ourselves,” Christy Spencer said. “We’ve spent the past couple of years dealing with this litigation and so now the time has come to move forward. It’s just not feasible for us to continue to operate the museum.

    “The museum has never been a money generator. It was never designed to be a revenue generator; [it] was really a way to fuel Will’s passion for the motorsports industry and give hardcore race fans a place to come and see some unique pieces of history.”

    A large part of the collection will go to Mecum Auctions in Kissimmee, Florida, in early January.

  • BAT May Decrease ITC Stake

    BAT May Decrease ITC Stake

    Timon Schneider/Wirestock

    BAT is considering decreasing its 29.02 percent stake in ITC, according to Money Control.

    The move would not have a major impact on ITC, according to analysts. 

    “We don’t need to have more than 25 percent shareholding in ITC to have a strategic influence, including veto rights. Today, we have more than that,” said Tadeu Marroco, BAT CEO.

    BAT currently holds ITC shares amounting to INR1.63 trillion ($19.64 billion).